What's going on: Gabon

Opacity and managed decline. First thoughts that spring to mind when thinking of Gabon.

Gabon’s oil production has been in terminal decline since the mid 90’s. The crash in crude prices, combined with the uncomfortable fact that oil exports make up 45% of Gabon’s GDP, must have the 52 year long Bongo regime growing a few grey hairs over the issue..

A quick history lesson

Gabon’s oil story began in the 1960's, shortly after declaring independence. Being a former French colony, naturally several Francophone companies were awarded alluring contracts to conduct exploration and production operations. (Remnants of this are still visible today).

The country has had a ‘tip-toe’ relationship with OPEC, joining in 1975, but leaving in 1996 over a payment dispute. It re-joined in 2016, at a time production cuts were being imposed upon members - something Gabon had no difficulty in achieving.

A number of large onshore discoveries were made through the 70’s to the late 90’s, propelling the country to peak production levels of 217,000 bbl/d in 1997. Although several minor discoveries have been made since, the country had not seen a major find for decades.

For much of recent history, news coming out of Gabon has been centered around workovers, acquisitions and divestitures of mature, onshore and shallow-water assets.

Dull for some.

However, the country has seen some unorthodox entrants, BW Offshore being an example. An FPSO company by background, picked up and developed the overlooked Ruche/Tortue Shallowater acreage (Drilling an exploration well with the Borr Norve as we speak).

Turning things around

In 2018, Gabon began revising the hydrocarbon law in a bid to be attractive on the world stage and a lower oil price environment. Delayed slightly by parliamentary hurdles, presidential health concerns and a failed coup, the bill was finally enacted late July 2019.

In July 2018, the country launched the 12th Offshore Licensing Round. A total of 35 blocks ranging from shallow to deep waters covering the full length of the coast were put on offer.

It is still early days, but success has started to trickle through with the award of two deep water blocks to Petronas. Namely, F12 and F13 within the prospective deepwater play towards the south of the country. The first awards in five years!

Bright spots

A recent string of deepwater pre-salt discoveries has put Gabon back on the radar. Characterised by complex salt structures, the Southern Gabon basin has been described by Spectrum as “seriously under explored” and “very promising”.

Pre-salt discoveries offshore Gabon: 2019

Total kicked off the intrigue with Diamman-1 back in 2013. The well encountered 50-55m net pay of gas and condensate in sandstone reservoirs, opening the play wide open.

Then in 2014, Shell joined the action with Leopard-1, encountering a “substantial” 200m net pay of gas, in a pre-salt reservoir.

The crash

The oil price free fall in 2014 drew everything to a halt. Overspending was reigned in and invariably, deepwater exploration budgets were the first to go. Like most of Sub-Saharan Africa, Gabon did not escape the exodus.

Borrowing the same rig, a month later Repsol was hoping for the same luck with Ivela-1. They successfully intercepted a 78m gross oil column. But Woodside (partner in both wells), reported at the time that both finds, on their own, were deemed noncommercial due to the associated deepwater development costs.

What next?

Petronas intends to keep going, announcing its intent to embark on a second exploration phase hoping that further discoveries will make commerciality more feasible. With the award of two more blocks just to the north, they’re betting this may be possible through a clustered development. First, it will appraise the Boudji discovery with the West Polaris drillship, which is set to commence operations early September with a day rate closer to $200k/d.

No further exploration is yet planned for deepwater Gabon. But it can’t be denied, excitement is picking up again and all eyes are on what happens next.

The cynic in me would point out that the same could be said of Gabon during the 10th and 11th bid rounds. The gambler though, thinks this time could be different.